I am a serving Officer in the RAF. Due to the nature of my role, I have to live where I work and can be posted at quite short notice.
Until recently we, that’s my wife and I, owned a buy to let property which we sold about 11 months ago.
Our question is, why do we seem to be blocked when applying for a holiday let mortgage, due to the fact that we are not owner ocupiers? We don’t wish to seem like the “ its not fair type” of people, but we can’t alter the nature of my job. There seems to be no flexibility at all.
We know that a buy to let mortgage might be available, but to be fair the buy to let property that we owned was not really looked after by the tenants and, of course, we couldn’t use it ourselves. Having a holiday home away from married quarters, which could also be holiday let would be a welcome bonus to our family.
Our second question is about tax, the new second property additional tax!
We have spoken to several people, including the military financial advice people and they seem to think that we would still be caught by the additional 3% Stamp Duty. Could we ask, what’s your view?
Hi , Jon. As an ex service person myself, I’m always happy to hear from serving members of the armed forces and would be delighted to answer your questions.
Your findings are correct in that most lenders operating in the holiday let market have criteria which states that “ordinary” applicants must be owner occupiers. This policy is all about avoiding fraud by preventing people using BTL and Holiday Let products to purchase properties that they could not otherwise afford and living in them as their main residence. This area of mortgage fraud is under the scrutiny of the FCA.
But service people don’t live ordinary lives, more extraordinary. Fortunately, we have access to lenders that offer a special dispensation in cases like yours: You and your wife will be deemed owner occupiers by virtue of your tied accommodation status.
Now onto the little matter of tax, although an extra 3% SDLT (stamp duty land tax) on the entire purchase price of a second property, in addition to the usual marginal rates is no little matter!
The legislation has been brought in (so the Gov’t says) to cool the housing market by making more properties available for owner occupation. However, it has been drafted in such a way that careful interpretation can ensure that some purchases will not be subject to the additional tax, even if the property is not intended for owner occupation.
In your case, because you do not own any other property and practicalities mean that you have to live where you work, the advice that we have received is that you are not caught by the spirit of the new SDLT second property tax rules.
If, on the other hand, you were to purchase using a Special Purpose Vehicle (SPV) Limited Company, even though the company would own only 1 property, you would be deemed to fall within the spirit of the rules and the additional tax would apply.
As Solicitors are the SDLT collectors for HMRC, it’s very important that you choose a professional property lawyer who understands the rules, particularly in your situation, for a legal conveyance involving a holiday let property. We have regular dealings with firms which can provide that advice; call us for further details.